JUDGMENT
S.C. Tiwari, Accountant Member
1. These two appeals have been filed by the revenue on 20.5.2002 against the orders of the ld. CIT (Appeals)-VII, New Delhi dated 27.2.2002 and 11.2.2002 respectively in the case of the assessee in relation to assessment orders under Section 143 (3) for assessment years 1996-97 and 1998-99 respectively.
2. The only point of dispute in these two appeals relates to the correct method of calculation of deduction under Section 80HHD available to the assessee. Facts of the case leading to this dispute, briefly, are that the assessee is engaged in the business of a travel agent and tour operator. The assessee is eligible to deduction under Section 80HHD in relation to its receipts in convertible foreign exchange on account of services provided to foreign tourists. The amounts in foreign exchange collected by the assessee included the amounts payable to hotels for boarding and lodging of foreign tourists. In accordance with the provisions of Sub-section (2A) of Section 80HHD, the assessee issued certificate in Form 10 CCEA to the hotels of the amounts paid to them in Indian currency obtained by conversion of foreign exchange received from the group of foreign tourists. The assessee’s gross foreign exchange receipts of Rs. 6,72,89,350/- were accordingly reduced by the sum of Rs. 2,51,64,250/- being the amount in relation to which the assesses had issued 10 CCEA certificates. In the assessment order, the Assessing Officer while reducing the assessee’s gross receipts in convertible foreign exchange by the sum of Rs. 2,51,64,250/-, he did not reduce the same amount from the total receipts of the business of the assessee from domestic sales as well as foreign tourists. The ld. Assessing Officer accordingly worked out deduction under Section 80HHD at Rs. 15,08,969/- only for assessment year 1996-97. On assessee’s appeal, the ld. CIT (A) held that the sum of Rs. 2,51,64,250/- was required to be reduced both from the numerator as well as denominator. He accordingly worked out the deduction under Section 80HHD at Rs. 42,85,325/-. Aggrieved by that order, the revenue is in appeal before us.
3. During the course of hearing before us, the ld. Departmental Representative argued that there was no warrant in the language of the provisions of Section 80HHD (3) to reduce the total receipts of the business of the assessee by the amounts for which the assessee had issued 10 CCEA certificates. That being so, the ld. CIT (A) erred in interfering with the computation of deduction as made by the ld. Assessing Officer.
4. The ld. Authorised Representative of the assessee argued that as the foreign exchange receipts of the assessee had been reduced, it was only logical that the same should be reduced from the total business receipts of the assessee as well. In support of these contentions, the ld. counsel for the assessee relied upon the judgements reported in 245 ITR 769 (Bom.); 256 ITR 625 (Cal.) The ld. counsel also relied upon the decision of the ITAT, Calcutta reported in 53 ITD 180 (Cal.) and the decision of the Special Bench of the Tribunal reported in 83 ITD 96 (Cal.)(SB). The ld. counsel for the assessee further argued that if a different course was adopted that would result into an absurd situation. Hence, following the judgment of Hon’ble Supreme Court reported in 156 ITR 323 (SC) at page 339, the basis followed by the ld. CIT (A) should be upheld so as to avoid absurd results.
5. We have carefully considered the rival submissions. Various High Court judgements and Tribunal decisions relied upon by the assessee have been rendered in the context of Section 80HHC that for the purpose of working out export profits of the assesses, the amount of excise duty included in the domestic turnover should be excluded. In our opinion, the case of the assessee is on better footing. In the case of the assessee, being a tour operator, the amounts charged from the tourists include the amounts payable to hotels for the boarding and lodging of the tourists. As per the provision of Sub-section (2A) of Section 80HHD, such receipts belong to the hotels and not to the tour operator. Accordingly, the same are reduced from gross receipts in convertible foreign exchange that the assessee is considered to be entitled to and deduction is granted only in respect of net receipts in foreign currency. That being so, it is difficult to understand as to how such amounts for which the assessee issued certificates under 10 CCEA should be treated as belonging to the assessee as a tour operator for the purpose of total business receipts of the assessee. It is settled legal position that so as to work out proportionate amount correctly both the numerator as well as denominator should be found out on a uniform basis. There is a detailed discussion in this respect in the decision of ITAT Calcutta in 53 ITD 180 (Cal.). In our opinion, the legal position is more clear in the case of a tour operator because the exclusion of payments to hotels etc. is provided for in the statute itself by sub-section (2A) of Section 80HHD. We, therefore, do not see much room for a view other than that adopted by the ld. CIT (A). We uphold the same and dismiss these appeals filed by the revenue.
(Order pronounced in the open court on the 30th November, 2005.)